Brooks Automation Inc. has a market cap of $609.3 million; its shares were traded at around $9.44 with and P/S ratio of 2.8. BRKS is in the portfolios of David Nierenberg of D3 Family of Funds, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Gross margin dollars increased to $39.0 million for the three months ended March 31, 2010, an increase of 240.1% from a $27.8 million loss for the same prior year period. This increase was attributable to higher revenues of $111.1 million, an intangible asset impairment charge of $20.5 million which reduced the prior year gross profit, a $7.7 million reduction in charges for excess and obsolete inventory and $1.9 million of reduced amortization expense for completed technology intangible assets, due primarily to the impairment recorded for those assets during the second quarter of fiscal 2009. These decreases were partially offset by a less favorable product mix which reduced gross margin dollars by $12.1 million. Gross margin dollars increased to $65.2 million for the six months ended March 31, 2010, an increase of 404.5% from a $21.4 million loss for the same prior year period. This increase was attributable to higher revenues of $143.9 million, an intangible asset impairment charge of $20.5 million which reduced the prior year gross profit, a $12.9 million reduction in charges for excess and obsolete inventory and $3.8 million of reduced amortization expense for completed technology intangible assets. These decreases were partially offset by a less favorable product mix which reduced gross margin dollars by $16.6 million.

Gross margin dollars for our Critical Solutions Group segment increased to $22.6 million for the three months ended March 31, 2010, an increase of 260.2% from a $0.1 million loss in the same prior year period. Gross margin dollars for this segment increased to $38.3 million for the six months ended March 31, 2010, an increase of 476.3% from $6.7 million in the same prior year period. These increases were attributable to higher revenues of $42.8 million for the three month period and $50.1 million for the six month period, reduced charges for excess and obsolete inventory of $1.1 million for the three month period and $2.9 million for the six month period and reduced amortization expense of $0.6 million for the three month period and $1.3 million for the six month period. Gross margin percentage was 37.6% for the three months ended March 31, 2010 as compared to (0.5)% in the same prior year period. Gross margin percentage was 37.1% for the six months ended March 31, 2010 as compared to 12.5% in the same prior year period. These increases are primarily the result of higher absorption of indirect factory overhead on higher revenues. Other factors increasing gross margin percentage include decreased charges for excess and obsolete inventory which increased gross margin percentage by 5.1% for the three month period and 4.7% for the six month period and reduced amortization expense for completed technology intangible assets which increased gross margin percentage by 1.0% for the three month period and 1.2% for the six month period.

Gross margin dollars for our Systems Solutions Group segment increased to $13.1 million for the three months ended March 31, 2010, an increase of 320.7% from a $5.9 million loss for the same prior year period. Gross margin dollars for this segment increased to $20.6 million for the six months ended March 31, 2010, an increase of 369.3% from a $7.7 million loss for the same prior year period. These increases were attributable to higher revenues of $64.4 million for the three month period and $88.8 million for the six month period, decreased charges for excess and obsolete inventory of $4.7 million for the three month period and $7.8 million for the six month period and $0.1 million of reduced amortization expense for the three month period and $0.3 million for the six month period. Gross margin percentage increased to 18.0% for the three months ended March 31, 2010 as compared to (71.8)% in the same prior year period. Gross margin percentage increased to 17.2% for the six months ended March 31, 2010 as compared to (24.8)% in the same prior year period. These increases were primarily attributable to higher absorption of indirect factory overhead on higher revenues. Other factors that led to the increase in gross margin percentage include decreased charges for excess and obsolete inventory which increased gross margin percentage by 52.1% for the three month period and 22.8% for the six month period and reduced amortization expense for completed technology intangible assets, which increased gross margin percentage by 0.2% for both the three and six month periods. These increases in gross margin percentage were partially offset by a less favorable product mix which reduced gross margin percentage by 16.7% for the three month period and 13.8% for the six month period. The less favorable product mix is attributable to increases in Extended Factory product sales which are less profitable than other products within this segment.

Selling, general and administrative, or SG&A expenses were $20.8 million for the second quarter of fiscal year 2010, a decrease of $4.4 million compared to $25.2 million in the same prior year period. The decrease is primarily attributable to lower litigation costs of $3.6 million and $1.5 million of lower amortization of intangible assets, due primarily to the impairment recorded for those assets during the second quarter of 2009. The decreases in SG&A expenses were partially offset by higher depreciation expense of $0.5 million, which relates primarily to the Oracle ERP system which was placed in service in most of our U.S. based operations during the fourth quarter of fiscal year 2009. SG&A expenses were $39.8 million for the six months ended March 31, 2010, a decrease of $13.0 million compared to $52.8 million in the same prior year period. The decrease is primarily attributable to $5.4 million of reduced litigation costs, lower labor costs of $3.2 million as we reduced our headcount to align our SG&A resources with our new management structure, a $2.9 million reduction in amortization of intangible assets and a $0.9 million reduction in software maintenance costs. The decreases in SG&A expenses were partially offset by higher depreciation expense of $0.9 million, which relates primarily to the Oracle ERP system. We settled our litigation matters with the SEC during fiscal year 2008. We have incurred minimal indemnification costs for these litigation matters during the six months ended March 31, 2010. Our indemnification costs, net of insurance reimbursements, were $3.6 million and $5.4 million for the three and six month periods ended March 31, 2009.

We recorded a restructuring charge of $0.5 million and $2.0 million for the three and six month periods ended March 31, 2010. These charges include severance related costs of $0.4 million and $0.6 million for the three and six month periods, and facility related costs of $0.1 million and $1.4 million for the three and six month periods. The severance costs consist primarily of costs to adjust severance provisions related to general corporate positions eliminated in prior periods. The facility costs include $0.1 million and $0.2 million for the three and six months ended March 31, 2010 to amortize the deferred discount on multi-year facility restructuring liabilities. In addition, we revised the present value discounting of multi-year facility related restructuring liabilities during the first quarter of fiscal year 2010 when certain accounting errors were identified in our prior period financial statements that, individually and in aggregate, are not material to our financial statements taken as a whole for any related prior periods, and recorded an adjustment of $1.2 million. The restructuring charges for the three months ended March 31, 2010 were primarily related to general corporate support functions. Restructuring charges for the six months ended March 31, 2010 include $0.1 million for our Global Customer Operations segment, with the balance related to general corporate support functions.

Cash provided by operating activities was $9.3 million for the six months ended March 31, 2010, and was comprised of net income of $18.1 million, which includes $13.8 million of net non-cash related charges such as $9.5 million of depreciation and amortization and $3.6 million of stock-based compensation which was partially offset by $7.8 million from our gain on sale of intellectual property rights. Further, cash provided by operations was reduced by net increases in working capital of $14.7 million, consisting primarily of $29.3 million of increases in accounts receivable and $19.7 million of increases in inventory. The increases in accounts receivable and inventory were caused by a 129.9% increase in revenues for the six months ended March 31, 2010 as compared to the first six months of fiscal year 2009. In addition, we paid approximately $3.0 million in annual incentive compensation payments during the first quarter of fiscal year 2010 related to the prior fiscal year. Our other current assets have also increased as of March 31, 2010 to reflect the $3.9 million of refundable taxes for the carryback of alternative minimum tax losses. These increases in working capital were partially offset by $40.4 million of increases in accounts payable and $1.1 million of higher deferred revenues.

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